Kirchner Fighting Inflation by Freezing Prices

Argentina's President Kirchner has been on the inflation warpath recently, trying to freeze prices of as many products as he can. Yesterday it was announced that he came to an agreement to freeze prices on some products with two prominent U.S. companies -- Kimberly-Clark, which makes diapers, facial tissue, and other paper products, and Proctor & Gamble, the largest consumer products company. This is in addition to the price agreements he already secured with ranchers, farmers, and supermarket owners.

Last month the annual inflation rate reached a 31-month high of 12.3%, so it is clear Kirchner has some work to do. It remains to be seen whether his war on prices will have any effect (so far it seems it hasn't). Previously, inflation was the scourge of Argentina for many decades. It disappeared for a decade in the 1990s after the peso was linked 1-to-1 with the dollar.

Kirchner has said that he worries about inflation so much that it "keeps him awake at night." Already I can see some of the beginning effects -- more and more property owners are asking for rent to be paid in dollars rather than pesos.

For the sake of the economy, which has just begun to really recover after the 2001/2002 crisis, let's hope Kirchner and the government can get this problem under control. As popular as Kirchner is right now, he could find himself in a very bad position if there is runaway inflation by the time the election rolls around.